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THIEVES IN CYBERSPACE: EXAMINING MUSIC PIRACY AND COPYRIGHT LAW DEFICIENCIES IN RUSSIA AS IT ENTERS THE

DIGITAL AGE

Michael Mertens

I. INTRODUCTION Come senators, congressmen

please heed the call Don’t stand in the doorway

Don’t block up the hall For he that gets hurt

Will be he who has stalled There’s a battle outside

And it is ragin’ It’ll soon shake your windows

And rattle your walls For the times they are a-changin.1

Although Bob Dylan did not have copyright law in mind when he wrote “the times they

are a-changin’,” his lyrics certainly ring true with the ongoing battle over Internet piracy. Music

is a $40-billion-dollar-a-year industry that touches people in every corner of the globe, making it

a universal form of communication.2 Armed with the newly developed MP3,3 a nineteen-year-

old college student named Shawn Fanning dramatically changed this form of communication in

1998 from his dorm room.4 Fanning, the creator of Napster, was looking for a way to develop a

real-time index to allow computer users to share songs in MP3 format in a quick and fluent

fashion.5 Reasoning that users would take responsibility for the songs they offered, he did not

give much thought to the legal issues of his invention.6 With uncanny intuition, a friend and

early Napster program tester sent Fanning a private e-mail containing one sentence, “’Do you 1 Lyrics from Bob Dylan’s song “the times they are a-changin’”, available at http://search.bobdylan.com/lyricsearch/searchResults.jsp?doSearch=true&q=the+times+they+are+a+changin&range=50 (last visited March 30, 2005). 2 Info from RIAA website at http://www.riaa.com/news/marketingdata/default.asp (last visited March 30, 2005). 3 The MP3 is the short name of the ISO-MPEG Audio Layer-3, an audio-compression technique developed in Germany that fits much more sound into fewer bits by eliminating data used to convey silences. JOSEPH MENN, ALL THE RAVE, THE RISE AND FALL OF SHAWN FANNING’S NAPSTER 30 (2003). 4 Id. at 29-33. 5 Id. at 34. 6 Id.

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realize that this is going to change everything?’”7 Fanning replied with “‘Yeah, I know.’”8 The

rest, as they say, is history.

By the fall of 1999, Napster had millions of adoring fans in colleges around the country,

as well as some not so adoring fans like the Recording Industry Association of America

(RIAA).9 Both sides drew their lines, and the battle began.10 By March 2002, in response to a

lawsuit filed by A&M Records, Inc., and seventeen other record companies, the Northern

District Court of California held that Napster “knowingly encourage[d] and assist[ed] the

infringement of [the record companies’] copyrights.”11 After a modified preliminary injunction

was issued by the District Court, the United States Court of Appeals for the Ninth Circuit

enjoined Napster from operating and determined that it must remain offline until it could remove

all infringing material from its website.12 Napster went bankrupt and sold to the highest bidder

in September 2002.13

Since the Napster case, the battle between the giant record companies and consumers has

raged in full force.14 The recording industry, through the guise of the RIAA,15 has taken the

litigation path and at the same time has attempted to revise its business model to cater to its

customers’ new thirst for downloading music online.16 Consumers have been fighting back with

7 Id. at 37. 8 Id. 9 Grace J. Bergen, Litigation as a Tool Against Digital Piracy, 35 MCGEORGE L. REV. 181, 185 (2004). 10 Id. 11 A&M Records, Inc. v. Napster, Inc. 239 F.3d 1004, 1020 (9th Cir. 2001). 12 Bergen, supra note 9, at 186. 13 Id. 14 Id. at 203. 15 The RIAA, or Recording Industry Association of America, is the trade group that represents the U.S. recording industry. RIAA members account for about 90% of all legitimate sound recordings in the U.S. Information from RIAA website, at http://www.riaa.com/about/default.asp (last visited March 30, 2005). 16 Bergen, supra note 9, at 203.

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more peer-to-peer services and have expanded their legal theories to include ideas such as “free

speech, due process, privacy protection, fair use, and anti-trust[.]”17

Ancillary to the domestic music piracy problem is an international piracy problem that is

much more pervasive and just as harmful to the U.S. economy.18 On February 12, 2002, Hilary

Rosen19 testified at a Senate Foreign Relations Committee that “[s]tifling piracy levels in many

parts of the globe undermine the stability and growth of U.S. entertainment industries, affecting

not only U.S. creators and jobs, but also robbing other countries of much needed foreign

investment and cultural and economic development.”20 Music pirating comes in two forms—

physical piracy21 and Internet piracy.22 According to the 2004 Recording Industry Commercial

Piracy Report,23 an estimated 35 percent of the music CDs sold worldwide in 2003 were

pirated.24 This amounts to an estimated $4.5 billion dollars, or 15 percent of the legitimate music

market.25 This figure does not even account for the loss of dollars from Internet piracy.26 Hilary

Rosen further stated to the Senate Foreign Relations Committee that “Internet piracy poses a

17 Id. 18 Examining the Theft of American Intellectual Property at Home and Abroad: Hearing Before the Senate Committee on Foreign Relations, 107th Cong. (2002) [hereinafter Hearings] (prepared statement of Hilary Rosen, president and CEO of RIAA). 19 Hilary Rosen is the president and CEO of the Recording Industry Association of America (RIAA). 20 Hearings, supra note 18, at 59 (written statement of Hilary Rosen). 21 Physical piracy involves any unauthorized copying of works in an actual physical form, such as DVD’s and CD’s. Hearings, supra note 18, at 60 (written statement of Hilary Rosen). 22 Id. Piracy is defined as “the unauthorized and illegal reproduction or distribution of materials protected by copyright . . . .” BLACK’S LAW DICTIONARY (8th ed. 2004). Internet Piracy is therefore any such form of piracy that takes place through the internet, such as the sale, sharing, or transfer of music files without the copyright owners permission. 23 The Recording Industry Commercial Piracy Report is a yearly report of countries who consistently fail to guard against piracy. Summary of IFPI from website, at http://www.ifpi.org/site-content/about/mission.html (last visited April 3, 2005). The report is prepared by the International Federation of the Phonographic Industry (IFPI), which is an international organization that represents the recording industry worldwide, acting in affiliation with the RIAA to represent copyright interests. Id. 24 The Recording Industry Commercial Piracy Report, INTERNATIONAL FEDERATION OF THE PHONOGRAPHIC INDUSTRY, ANNUAL GLOBAL PIRACY REPORT 2 (2004), at http://www.ifpi.org/site-content/antipiracy/piracy-report-current.html (last visited April 3, 2005) [hereinafter The Recording Industry Piracy Report 2004]. 25 Id. at 3. 26See Hearings, supra note 18 (written statement of Hilary Rosen).

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global and borderless threat to the future success of American creators.”27 According to Rosen,

these unauthorized digital broadcasts and Internet transmissions are just as illegal as their

physical counterparts.28

Among the world leaders in global music piracy, Russia has one of the largest piracy

problems.29 Its pirate market value currently stands at $332 million.30 In the past, Russia’s

piracy problem was restrained to physical piracy of CDs, but as the country has quickly entered

the digital age, a new problem has emerged. 31 Russia has now developed a thriving online

music sales business, and these websites are slowly gaining popularity in the U.S. and elsewhere.

These websites prove that despite constant pressure by the U.S. and the international

community, Russia has consistently failed to curb its piracy problem. Even pressure from the

World Trade Organization32 to conform to its standards required for admission has failed.

Copyright infringers are finding novel ways such as the Internet to pirate their goods, while the

Russian government still struggles to police and prosecute the more traditional types of piracy.33

In order to fight Internet piracy and prevent it from becoming an even larger problem, the U.S.

must take a two-pronged approach. First U.S. copyright owners must set an example to Russia

by suing the infringers, regardless of their chance of success. Second, the U.S. must take drastic

27Hearings, supra note 18, at 60 (written statement of Hilary Rosen). 28 Id. 29 The Recording Industry Commercial Piracy Report 2004, supra note 24 at 10. 30 Id. 31 According to the Russian Economic Development and Trade Ministry, at the end of 2004 there were 18.5 million Internet users in Russia. One-Twelfth of Russians are Internet Users, RUSSIAN BUS. MONITOR, Feb. 18, 2005, available at 2005 WLNR 2306656. This amounts to one-twelfth of the population. Id. In addition, at the end of 2004 there were over 15 million personal computers (PCs) used, which amounts to 10.4 PCs per one hundred people in Russia. Id. This figure was up 15 percent from the previous year. Id. 32 “The World Trade Organization (WTO) is the only global international organization dealing with the rules of trade between nations. Information from WTO website, at http://www.wto.org/english/thewto_e/whatis_e/whatis_e.htm (last visited April 3, 2005). At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. Id. The goal is to help producers of goods and services, exporters, and importers conduct their business.” Id. 33 More traditional types of piracy mean piracy in the physical form for physical distribution. This includes such things as CDs, DVDs, audiocassettes, VHS, etc.

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steps to pressure the Russian government to solve the piracy problem itself by imposing trade

sanctions.

This comment will evaluate the Russian piracy problem in general, focusing on the

legality of its new online music market, and what the U.S. should do to remedy these problems.

This comment proceeds in four parts. Part II will briefly give a background of the current state

of international copyright law. Part III will describe the history of Russia’s copyright law, its

piracy problem, and its recent attempts to reform and meet international standards. Part IV will

evaluate the legality of Russia’s music sales websites and how they compare to Internet

standards in the United States. Part V will briefly discuss solutions to correct Russia’s piracy

problem and their problem with illegal online music sales.

II. HISTORY OF INTERNATIONAL COPYRIGHT LAW FOR SOUND RECORDINGS

A. Berne Convention and Other Early Conventions

A short history of international copyright law is needed to place the Russian problem in

context. The beginning of global copyright protection occurred with the Convention for the

Protection of Literary and Artistic works (hereinafter “Berne Convention”), which met on

September 9, 1886, in Berne, Switzerland.34 Ten countries initially attended the convention with

the objective of establishing copyright protection between their country’s respective

boundaries.35 The convention rested on three principles to determine a minimum amount of

protection granted to authors’ works: (a) Works originating in one of the contracting States (that is, works the author of which is a national of such a State or works which were first published in such a State) must be given the same protection in each of the other contracting States as the latter grants to the works of its own nationals (principle of “national treatment”).

34 Heather Nehila, International Copyright Law: is it Music to American Ears?, 16 TEMP. INT’L & COMP. L.J. 199, 200 (2002). 35 Id.

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(b) Such protection must not be conditional upon compliance with any formality (principle of “automatic” protection). (c) Such protection is independent of the existence of protection in the country of origin of the work (principle of the “independence” of protection). If, however, a contracting State provides for a longer term than the minimum prescribed by the Convention and the work ceases to be protected in the country of origin, protection may be denied once protection in the country of origin ceases.36

After its adoption in 1886, the Berne Convention was revised several times—most recently in

1971 in Paris—to respond to new technological developments such as phonography,

photography, and television.37

One of the major points of the Berne Convention, summarized in point (b) above, was

that copyright protection for the signed parties did not depend on fulfilling any formal

requirements, which means that the protection was automatic once an artistic work was created.38

However, citizens inside their own country could still be required to follow formalities specified

by their country.39 In addition, the Berne Convention gave authors protected by the Convention

“the exclusive right of authorizing the reproduction of these works, in any manner or form.”40 A

reproduction was defined as “any sound or visual recording.”41

In 1961, the International Convention for the Protection of Performers, Producers of

Phonograms and Broadcasting Organizations (hereinafter “Rome Convention”) was signed in

Rome.42 This convention was important because it allowed producers of phonograms43 to enjoy

36 Summary of Berne Convention for the Protection of Literary and Artistic Works from WIPO website, at http://www.wipo.int/treaties/en/ip/berne/summary_berne.html (last visited April 3, 2005). 37 MIHALY FICSOR, THE LAW OF COPYRIGHT AND THE INTERNET 3-4 (Oxford University Press 2002) (2002). 38 Nehila, supra note 34, at 200. 39 Id. 40 Berne Convention for the Protection of Literary and Artistic Works, Sept. 9, 1886, art. 9(1), S. Treaty Doc. No. 99-27, available at http://www.wipo.int/treaties/en/ip/berne/trtdocs_wo001.html (last visited April 3, 2005) [hereinafter Berne Convention]. 41 Berne Convention, supra note 40, at art. 9(3). 42 Ficsor, supra note 37, at 4. 43 “Phonograms are defined in the Rome Convention as meaning any exclusively aural fixation of sounds of a performance or of other sounds.” Summary of the Rome Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations from WIPO website, at http://www.wipo.int/treaties/en/ip/rome/summary_rome.html (last visited April 3, 2005).

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the right to “authorize or prohibit the direct or indirect reproduction of their phonograms.”44

Article 3(e) of the Rome Convention defines reproduction as “the making of a copy or copies of

a fixation.”45 In addition, the Report of the Rapporteur-General46 gives a useful explanation of

the meaning of direct and indirect reproduction: “‘It was understood that direct or indirect

reproduction includes, among other things, reproduction by means of: (a) moulding and casting;

(b) recording the sounds produced by playing a pre-existent phonogram; and (c) recording off the

air a broadcast of the sounds produced by playing a phonogram.’”47

The rights of phonogram producers were further protected against unauthorized

duplication of their work in the 1971 Geneva Convention for the Protection of Producers of

Phonograms Against Unauthorized Duplication of Their Phonograms (hereinafter “Phonograms

Convention”).48 Article two of the convention specifies that: Each Contracting State shall protect producers of phonograms who are nationals of other Contracting States against the making of duplicates without the consent of the producer and against the importation of such duplicates, provided that any such making or importation is for the purpose of distribution to the public, and against the distribution of such duplicates to the public.49

The term “duplicate” is defined in Article 1(c) as “an article which contains sounds taken

directly or indirectly from a phonogram and which embodies all or a substantial part of the

sounds fixed in that phonogram[.]”50 The Phonograms Convention has been described as a more

narrow protection of rights because the words “an article” refer to a tangible copy of the

44International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, Oct. 26, 1961, art. 10, available at http://www.wipo.int/treaties/en/ip/rome/trtdocs_wo024.html (last visited April 3, 2005) [hereinafter Rome Convention]. 45 Id. at art. 3(e). 46 The Rapporteur-General, or Reporter General, is the person in charge of documenting the event and compiling a report. 47 Ficsor, supra note 37, at 95. 48 Id. at 4. 49 Convention for the Protection of Phonograms Against Unauthorized Duplication of Their Phonograms, Oct. 29, 1971, art. 2, 25 U.S.T. 309, available at http://www.wipo.int/treaties/en/ip/phonograms/trtdocs_wo023.html (last visited April 3, 2005) [hereinafter Phonograms Convention]. 50 Ficsor, supra note 37, at 96.

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phonogram, whereas the concept of “reproduction” used in the other conventions is broader and

would include electronic intangible copies.51

B. World Intellectual Property Organization (WIPO)

The World Intellectual Property Organization (WIPO) is a specialized agency within the

United Nations.52 The Convention establishing the WIPO was signed at Stockholm on July 14,

1967.53 Its purpose is to protect intellectual property throughout the world by collaborating with

other international organizations and states and to ensure administrative cooperation among the

Unions.54 Rapid advances in computer technology led to a Diplomatic Conference in Geneva,

Switzerland, in 1996 in order to strengthen international protection for performers and producers

of phonograms.55 The WIPO produced two treaties at that conference—the WIPO Copyright

Treaty and the WIPO Performances and Phonograms Treaty.56 These treaties are commonly

referred to as the WIPO Internet treaties.57 In addition to administering these treaties, the WIPO

also administers the Berne, Rome, and Phonograms Convention Treaties.58

The WIPO Copyright Treaty (WCT) strengthens copyright protection from the Berne

Convention, but it does not pre-empt it.59 Article 6 of the WCT states, “[a]uthors of literary and

artistic works shall enjoy the exclusive right of authorizing the making available to the public of

51 Id. 52 Nehila, supra note 34, at 201. 53 See Convention Establishing the World Intellectual Property Organization, July 14, 1967, 21 U.S.T. 1749, available at http://www.wipo.int/treaties/en/convention/trtdocs_wo029.html (last visited April 6, 2005). 54 Id. 55 Nehila, supra note 34, at 201. 56 Id. 57 Jennifer Newton, Global Solutions to Prevent Copyright Infringement of Music Over the Internet: the Need to Supplement the WIPO Internent Treaties with Self-Imposed Mandated, 12 IND. INT’L & COMP. L. REV. 125, 142 (2001). 58 List of WIPO administered Treaties, available at http://www.wipo.int/treaties/en/index.jsp (last visited April 6, 2005). 59 Nehila, supra note 18, at 201; WIPO Copyright Treaty, Dec. 20, 1996, art. 1, S. Treaty Doc. No. 105-17, available at http://www.wipo.int/treaties/en/ip/wct/trtdocs_wo033.html (last visited April 6, 2005) [hereinafter WCT].

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the original and copies of their works through sale or other transfer of ownership.”60

Additionally, Article 8 of the WCT states that [A]uthors of literary and artistic works shall enjoy the exclusive right of authorizing any communication to the public of their works, by wire or wireless means, including the making available to the public of their works in such a way that members of the public may access these works from a place and at a time individually chosen by them.61

The last part of the article covers on-demand, interactive communication via the Internet.62 The

Berne Convention was further updated and clarified by an attached agreement to the WCT,

which states that “reproduction” rights, as set out in the Berne Convention, fully apply in the

digital world.63 In addition, the agreement states, “it is understood that the storage of a protected

work in digital form in an electronic medium constitutes a reproduction within the meaning of

Article 9 of the Berne Convention.”64

The WIPO Performances and Phonograms Treaty (WPPT) parallels the rights of the

WCT concerning the rights of reproduction.65 As in the WCT, the right of reproduction fully

applies in the digital environment.66 Article 7 of the WPPT states, “[p]erformers shall enjoy the

exclusive right of authorizing the direct or indirect reproduction of their performances fixed in

phonograms, in any manner or form.”67 Article 11 grants the same reproduction right, but it

omits the words “performances fixed in,” clarifying the term even further to mean “any

phonogram.”68

60 WIPO Copyright Treaty, Dec. 20, 1996, art. 6, S. Treaty Doc. No. 105-17, available at http://www.wipo.int/treaties/en/ip/wct/trtdocs_wo033.html (last visited April 6, 2005) [hereinafter WCT]. 61 Id. at art. 8. 62 Summary of WCT, available at http://www.wipo.int/treaties/en/ip/wct/summary_wct.html (last visited April 6, 2005). 63 Newton, supra note 57, at 145. 64 Id. 65 Nehila, supra note 34, at 202. 66 WIPO Performances and Phonograms Treaty, Dec. 20, 1996, attached agreement #6, S. Treaty Doc. No. 105-17, available at http://www.wipo.int/treaties/en/ip/wppt/trtdocs_wo034.html (last visited April 6, 2005) [hereinafter WPPT]. 67 Id. at art. 7. 68 Id. at art. 11.

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One hundred and fifty countries accepted the two Treaties, but acceptance did not imply

ratification.69 In order for the WCT and the WPPT to enter into force,70 at least thirty parties had

to ratify them.71 On March 6, 2002, the thirty party requirement was met, and the WCT was

entered into force.72 Again, on May 20, 2002, the thirty party requirement was met for the

WPPT, and it was entered into force.73 As of March 7, 2005, there are 51 contracting countries

for the WCT and 49 contracting countries for the WPPT.74 These Treaties are important because

they “lay down the legal groundwork to safeguard the interests of creators in cyberspace and

open new horizons for composers, artists, writers and others to use the Internet with confidence

to create, distribute and control the use of their works within the digital environment.”75

C. The World Trade Organization (WTO) and TRIPs

The World Trade Organization (WTO) was created after World War II because of a need

to create greater international economic stability.76 The WTO’s main function is to enforce the

rules of the international trading system.77 It performs this function by playing three different

roles: “(1) To promote trade liberalization; (2) to act as a forum for trade negotiations; and (3) to

69 Nehila, supra note 34, at 201. Acceptance is defined as “[a]n offeree's assent, either by express act or by implication from conduct, to the terms of an offer in a manner authorized or requested by the offeror, so that a binding contract is formed.” BLACK’S LAW DICTIONARY (8th ed. 2004). Ratification is defined in International Law as “[t]he final establishment of consent by the parties to a treaty to be bound by it . . . including the exchange or deposit of instruments of ratification[.]” BLACK’S LAW DICTIONARY (8th ed. 2004). 70 To “enter into force” means to become effective law in the countries that are parties to the treaties. See Press Release, WIPO, WCT Enters Into Force (Mar. 6, 2002), available at http://www.wipo.int/edocs/prdocs/en/2002/wipo_pr_2002_304.html (last visited April 6, 2005). In this case, the Internet Treaties become law three months after they are ratified by thirty states. Id. 71 Nehila, supra note 34, at 201. 72 Summary of the WCT, supra note 62. 73 Summary of the WPPT, available at http://www.wipo.int/treaties/en/ip/wppt/summary_wppt.html (last visited April 6, 2005). 74 WCT Treaty Statistics from WIPO website, available at http://www.wipo.int/treaties/en/statistics/StatsResults.jsp?treaty_id=16 (last visited April 6, 2005); WPPT Treaty Statistics from WIPO website, available at http://www.wipo.int/treaties/en/statistics/StatsResults.jsp?treaty_id=20 (last visited April 6, 2005). 75 WIPO Press Release, supra note 70. 76 William J. Kovatch, Jr., Joining the Club: Assessing Russia’s Application for Accession to the World Trade Organization, 71 TEMP. L. REV. 995, 999 (1998). 77 Id. at 998.

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act as a forum for the settlement of trade disputes between member-states.”78 Membership in the

WTO comes with the advantages of more stable trade relations, increased access to foreign

markets, and an increased opportunity to attract foreign investment.79

The WTO eventually grew out of the General Agreement on Trade and Tariffs (GATT),

drafted in 1947.80 The GATT, designed to protect trade in goods, was developed through a

series of negotiation rounds and eventually became the “constitution for international trade

law.”81 The WTO was established on January 1, 1995, as a result of the most recent negotiation

round—the Uruguay Round.82 The WTO does not supersede GATT but instead supplements and

enhances it by granting protection to trade in services and intellectual property.83 Membership in

the WTO takes the all or nothing approach because it requires its members to accept all the

results of the Uruguay Round.84 Any party that becomes a member must also comply with the

WTO’s Multilateral Trade Agreements.85 One of the most important agreements is the Trade

Related Aspects of Intellectual Property (TRIPs).86

TRIPs is a Multilateral Trade Agreement that brought intellectual property into the

GATT-WTO system for the first time.87 The objective of TRIPs is defined as: The protection and enforcement of intellectual property should contribute to the promotion of technological innovation and to the transfer and dissemination of technology, to the mutual advantage of producers and users of technological knowledge and in a manner conducive to social and economic welfare, and to a balance of rights and obligations.88

78 Id. at 998-99. 79 Id. at 999. 80 Russia and the World Trade Organization: Will TRIPS be a Stumbling Block to Accession?, 8 DUKE J. COMP. &INT’L L. 519, 520 (1998) [hereinafter Russia and WTO]. 81 Id. at 520-21. 82 Id. at 520. 83 Id. at 521. 84 Id. 85 Id. 86 Kovatch, supra note 76, at 1104. 87 Russia and the WTO, supra note 80, at 528. 88 Agreement on Trade-Related Aspects of Intellectual Property Rights, Apr. 15, 1994, Annex 1C, art. 7, 33 I.L.M 1197 (1994) [hereinafter TRIPS].

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TRIPs members are required to comply with the Berne and Rome Conventions and therefore

protect copyright material in much the same way.89 For example, Article 14(2) of TRIPs allows

producers of phonograms to “authorize or prohibit the direct or indirect reproduction of their

phonograms.”90

Enforcement mechanisms are the biggest advantage that membership in the WTO and

TRIPs provides.91 Members have general obligations to ensure that fair and equitable

enforcement procedures are available under their law to permit action against intellectual

property infringement.92 TRIPs outlines certain remedies that Members must provide, including

injunctions, damages, and destruction or removal of certain goods.93 In addition, Article 61 of

TRIPs requires members to provide, at a minimum, criminal procedures and penalties for willful

copyright piracy on a commercial scale.94

TRIPs also requires transparency between members.95 Members must publish laws,

regulations, judicial decisions, and administrative rulings pertaining to intellectual property to

allow other governments to become acquainted with them.96 Members are also obliged to

furnish this information to the Council for TRIPs for review and to other Member States upon

written request.97 The Council for TRIPs provides a forum for the settlement of trade disputes

by utilizing the GATT dispute-settlement procedures from the most recent Uruguay Round

89 Id. at art. 2. 90 Id. at art. 14(2). 91 Kovatch, supra note 76, at 1006. 92 TRIPS, supra note 88, at art. 41. 93 Russia and WTO, supra note 80, at 530; TRIPS, supra note 88, at art. 44-46. 94 TRIPS, supra note 88, at art. 61. 95 Id. at art. 63. 96 Id. 97 Id.

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revision.98 This forum is very important for insuring proper adherence to TRIPs obligations, and

Members face consequences and risk loss of benefits if they fail to adhere to their obligations.99

D. Other International Copyright Organizations

In addition to the various treaties and international governmental organizations that work

for the harmonization of copyright law, various private organizations also exist to promote the

effort. These organizations often comprise artists and private organizations from the U.S. and

other countries around the world, and work to protect and represent their respective members’

interests on an international setting. One such organization is the International Intellectual

Property Alliance (hereinafter IIPA). The IIPA is a private-sector coalition formed in 1984 to

represent U.S. copyright-based industries in an effort to improve international protection of

copyrighted materials.100 The goal of the IIPA is to help promote a legal system that deters

piracy, fosters technological and cultural development, and encourages investment and

employment.101

The IIPA works closely with the U.S. Trade Representative (USTR),102 especially during

its “Special 301” reviews, to determine if any foreign country’s policies or practices deny the

intellectual property rights of a U.S. citizen.103 In addition, the IIPA is involved with the

implementation of the WTO TRIPs agreement, it participates in discussions with the WIPO, it 98 Id. at art. 64; Summary of TRIPS from WTO website, available at http://www.wto.int/english/docs_e/legal_e/ursum_e.htm#nAgreement (last visited April 6, 2005). 99 Russia and WTO, supra note 80, at 531. 100 Summary of IIPA from website, available at http://www.iipa.com/aboutiipa.html (last visited April 6, 2005). 101 Id. 102 The USTR is the United States office that is responsible for developing and coordinating U.S. international trade, and overseeing negotiations with other countries. Information from USTR website, available at http://www.ustr.gov/Trade_Sectors/Intellectual_Property/The_Work_of_USTR_-_Intellectual_Property.html (last visited April 6, 2005). To protect intellectual property, the USTR works closely with Congress, the WTO and the WIPO. Id. The USTR’s most effective tool is its annual “special 301” review. Id. If a country has exceptionally high prevalence of copyright piracy the USTR will warn that country and potential investors by placing them on the Special 301 list. Id. Over time, if the country does not improve its intellectual property enforcement, the USTR will recommend the U.S. government impose trade sanction. Id. In addition, preferential tariff benefit treatment is given to certain countries provided they retain adequate protection of intellectual property. Id. 103 Summary of IIPA, supra note 100.

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works for the ratification and implementation of the WCT and the WPPT in various countries,

and it works closely with the RIAA.104

Another such organization is the International Federation of the Phonographic Industry

(hereinafter IFPI). The IFPI is an international organization that represents the recording

industry worldwide, acting in affiliation with the RIAA to represent U.S. copyright interests.105

It has over 1,450 members worldwide in seventy-five countries.106 It frequently lobbies various

governmental and international agencies—such as the WIPO—for improved copyright laws, and

it involves itself worldwide with anti-piracy litigation and offers training and support to

international investigators.107

In sum, all of these international conventions, treaties, and organizations play an

important role in the harmonization of copyright law around the world. Harmonization is crucial

to a world economy that is increasingly unrestricted. These conventions, treaties, and

organizations are very influential to how copyright law in Russia has developed in the past and

how it will develop in the future.

III. RUSSIAN COPYRIGHT HISTORY AND PIRACY PROBLEM

With the fall of communism in 1991, Russia was thrust head first into the realm of a

market economy and has been playing catch up with the Western world ever since. Because of

its history, Russia has struggled to change not only its laws but also its attitude toward the

protection of intellectual property.108 Under Communism, the government forced an inventor to

104 Id..105 Summary of IFPI from website, available at http://www.ifpi.org/site-content/about/mission.html (last visited April 6, 2005). 106 Id. 107 Id. 108 Alina M. Collisson, The End of Software Piracy in Eastern Europe? A Positive Outlook with International Help, 14 FORDHAM INTELL. PROP. MEDIA & ENT. L.J. 1005, 1011 (2004).

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relinquish all rights to his or her creation and in return compensated the inventor with a voucher

for limited rewards provided by the state.109 In response to rewarding creativity in this way,

Russian intellectual property law developed much differently than did American law.110

Much of Russia’s intellectual property law today is the result of its desire to join the

WTO.111 Russia would receive many potential benefits from membership in the WTO.112 These

benefits include greater access to world markets for Russian products, attraction of greater

foreign investment, and more job opportunities for Russian citizens.113 In turn, these benefits

would establish a more liberal trade environment and help reformers solidify Russia’s economic

transition.114 Unfortunately, Russia has been prevented from acceding to the WTO until it

complies with certain standards, namely TRIPs standards for protection of copyrights and other

intellectual property rights.115 It is important for this discussion to know the kind of legal

deficiencies Russia has and the affect they have on the country.

A. Legislative Deficiencies in Russia

At first glance, Russia seems to have invested a large amount of effort into establishing

an effective legal system to protect copyrights.116 In 1993, Russia enacted the Law on Copyright

and Neighboring Rights (Copyright Act),117 and in 1995, it joined the Berne Convention and

109 Id. 110 Id. 111 Kovatch, supra note 76, at 1006. 112 Id. 113 Id. at 1006-11. 114 Id. at 1008. 115 Russia Still Retaining Flaws in Intellectual Property Protection Sphere-Expert, INTERFAX: BUS. L. REP., June 8, 2004, available at 2004 WL 62192788. 116 Collisson, supra note 108, at 1015. 117 Law of the Russian Federation No. 5351-1 of July 9, 1993 on Copyright and Neighbouring Rights, translation available at LEXIS, garant 10001423, also available at http://www.fips.ru/avpen/docs.htm (last visited April 6, 2005). This Copyright Act for the first time in Russian history gave authors, not the state, the exclusive right to commercial use of their artistic works. Russia to Pass Copyright Bill, 5 NO. 3 J. PROPRIETARY RTS. 45 (1993). Until this time, the exclusive right to authors’ works was granted and regulated by the state. See Id. The law gives an author the natural right to his/her creation as soon as it is created. See Id. The author is now able to permit reproduction, sell or distribute copies of the work, or export the work. See Id. The right to export the work is very

16

Geneva Convention.118 In reality, however, much of the legislation is lacking. For example, the

Copyright Act failed to provide protection to pre-existing sound recordings created prior to

1973,119 as did the implementation of the Berne Convention, which is required by Article 18.120

In addition, the implementation of the Geneva Convention provided no protection for pre-

existing foreign sound recordings prior to the accession date of March 13, 1995.121 It was not

until 2004 that Russia adopted amendments to the Copyright Act finally giving protection to pre-

existing works prior to 1973 and sound recordings prior to 1995.122

The 2004 amendments were also intended to implement the WIPO Internet treaties, but

one important provision does not become effective until 2006; this provision pertains to the

“exclusive right of making available and right of communication to the public.”123 This

provision, found in Article 8 of the WCT and Article 14 of the WPPT, would be a useful

enforcement tool for producers and authors of phonograms against digital piracy.124 The

copyright holder would have the ability to decide whether his or her work would go onto the

significant, because the government will now longer be able to interfere in contractual relations between authors and their foreign contractors, or in what they do with their profits. See Id. 118 Collisson, supra note 108, at 1016; 2004 Special 301 Report Russian Federation, INT’L INTELLECTUAL PROPERTY ALLIANCE 194 (2004), available at http://www.iipa.com/rbc/2004/2004SPEC301RUSSIA.pdf (last visited April 6, 2005) [hereinafter IIPA 2004 Special 301 Report on Russia]. 119 Pre-existing sound recordings in the context of the Copyright Act includes any foreign sound recordings and other foreign works including filmed entertainment, which were created before the date of 1973. During passage of the Copyright Act, the Russian Government committed to include this protection, but in the 1993 implementing decree they denied the protection. 2004 Special 301 Report Russian Federation, INT’L INTELLECTUAL PROPERTY ALLIANCE 194 (2004), available at http://www.iipa.com/rbc/2004/2004SPEC301RUSSIA.pdf (last visited April 6, 2005) [hereinafter IIPA 2004 Special 301 Report on Russia]. 120 Id. Article 18(1) of the Berne Convention states that “This convention shall apply to all works which, at the moment of its coming into force, have not yet fallen into the public domain in the country of origin through the expiry of the term of protection.” Berne Convention, supra note 40, at art. 18. This term of protection of a work lasted for 50 years after the death of the author, as prescribed by article 7(1) of the Berne Convention. Id. at art. 7. 121 IIPA 2004 Special 301 Report on Russia, supra note 119, at 194. 122 2005 Special 301 Report Russian Federation, INT’L INTELLECTUAL PROPERTY ALLIANCE 27 (2005), available at http://www.iipa.com/rbc/2005/2005SPEC301RUSSIA.pdf (last visited April 6, 2005) [hereinafter IIPA 2005 Special 301 Report on Russia]. 123 IIPA 2005 Special 301 Report on Russia, supra note 122, at 27. 124 Id.

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Internet.125 The IIPA has urged Russia to move up the effective date of accession and

implementation of this provision and other provisions of the WIPO Internet treaties because of

the explosion of Internet piracy.126 These legislative deficiencies have led to a large problem

with copyright infringement in Russia.127

Russia’s biggest problem with copyright infringement comes from the factories—called

physical plants—that operate throughout the country.128 In 2003, the country had a CD piracy

rate of 64 percent, and Russian pirated discs were traced to more than 26 countries.129 These

CDs come from plants operating illegally throughout the country, many of which have intimate

ties to Russian organized crime.130 In 1996, there were two illegal CD plants in Russia.131

Today, there are 34 plants operating in Russia, 18 of which are located on government military

sites.132 This puts Russia’s manufacturing capacity at 390 million CDs annually, despite

legitimate sales of only 30 million CDs in 2003.133

To combat these illegal CD plants, the Russian government introduced licensing

regulations in June of 2002.134 The regulations make licensing mandatory and allow for the

unannounced inspections of plants.135 However, they are deficient because absent a court order

they only allow for suspension and not the withdrawal of licenses for plants found to be pirating

125 Newton, supra note 57, at 143. 126 IIPA 2005 Special 301 Report on Russia, supra note 122, at 28-29. 127 See Id. 128 The Recording Industry Piracy Report 2004, supra note 24, at 10. 129 Id. 130 IIPA 2005 Special Report on Russia, supra note 122, at 16. 131 The Recording Industry Piracy Report 2004, supra note 24, at 10. 132 IIPA 2005 Special Report on Russia, supra note 122, at 16. 133 IIPA 2005 Special Report on Russia, supra note 122, at 16; The Recording Industry Piracy Report 2004, supra note 24, at 10. 134 IIPA 2005 Special Report on Russia, supra note 122, at 16. 135 Id.

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material.136 As a result, the government is unable to close down illegal plants without going

through the courts, and many plants remain in operation despite their illegal actions.137

Piracy in Russia is addressed criminally by two bodies of law—“the Criminal Procedure

Code (“CPC”) and the Criminal Code.”138 Specifically, Article 146 of the Criminal Code was

the first law in Russian history to criminalize intellectual property violations.139 Until 2003, the

Criminal Code provided criminal prosecution for infringements that caused grave

harm/significant damage.140 It provided for fines of 200 to 400 times the minimum wage ($600

to $1,200) or two to four months of the defendant’s income, or correction labor from 180 to 240

hours, or up to two years in prison.141 The language of grave harm/significant damage created

much confusion until 2003, when the government changed the definition to a fixed threshold

amount.142 The IIPA still expressed some concern over these changes, however, because the

threshold for the lowest criminal violation—50,000 rubles (about $1,775)—means that any

criminal activity below that amount cannot be prosecuted as a criminal matter.143 Given that

almost all retail and some wholesale illegal activities do not engage in business of this

magnitude, many copyright infringers will be left outside the scope of criminal prosecution.144

Other deficiencies in the Criminal Code contribute to its inadequate deterrence of

commercial piracy. First, the fine amounts are so low that they provide little deterrence effect.145

Second, Article 146 does not currently provide the police explicit power to confiscate and

136 Id. 137 Id. at 16-17. 138 Collisson, supra note 108, at 1017. 139 Id. 140 2003 Special 301 Report Russian Federation, INT’L INTELLECTUAL PROPERTY ALLIANCE 265 (2003), available at http://www.iipa.com/rbc/2003/2003SPEC301RUSSIA.pdf (last visited April 6, 2005) [hereinafter IIPA 2003 Special 301 Report on Russia]. 141 Id. 142 IIPA 2005 Special 301 Report on Russia, supra note 122, at 27. 143 Id. 144 See Id. 145 Id. at 28.

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destroy the “machinery” used in making illegal copies.146 Article 146 only allows pirate and

counterfeit goods to be confiscated and destroyed.147 This is inconsistent with a 2004

amendment to article 49 of the Copyright Act.148 This amendment does grant police power over

the equipment and machinery, but Russian local counsel has unreasonably stated that this new

provision will not be used in criminal cases simply because the criminal code does not

specifically provide for it.149 Finally, the 1996 amendments to the Criminal Procedure Code took

investigation power away from the police and gave it to the prosecutors, thereby requiring the

police to get consent to investigate.150 Since prosecutor’s have larger workloads and less

resources, less piracy cases are being pursued.151 It also recategorized the term “public crime,”

removing every crime from the definition except those conducted by an organized group.152 This

means that in most cases, a right holder must file a formal complaint before the government

takes any action.153

Despite the promising changes made to the Criminal Code, continued progress is

desperately needed. Civil and administrative fines are grossly inadequate, mostly because many

of the operations are run by criminal organizations with numerous resources that are undeterred

by small fines.154 In addition, the civil system is sluggish and inefficient, and many

inexperienced judges have trouble imposing the laws.155 The threat of strong criminal penalties,

especially criminal sentences, will be the only effective deterrent against piracy.156

146 Id. 147 Id. 148 IIPA 2005 Special 301 Report on Russia, supra note 122, at 28. 149 Id. 150 IIPA 2003 Special 301 Report on Russia, supra note 140, at 266. 151 Collisson, supra note 108, at 1026. 152 IIPA 2003 Special 301 Report on Russia, supra note 140, at 266. 153 IIPA 2004 Special 301 Report on Russia, supra note 119, at 195. 154 Collisson, supra note 108, at 1025. 155 Id. 156 IIPA 2004 Special 301 Report on Russia, supra note 119, at 198.

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B. Enforcement Deficiencies in Russia

Although Russia has made considerable progress in developing a legal framework to

bring it up to world standards, these changes will do little good without adequate enforcement.157

The IIPA vice-president recently stated that “the latest additions to copyright law are a step in the

right direction, but that pirates will continue to profit until the state enforces the law properly.”158

The failure of the licensing regulations to be effective provides one example.159 In 2004, only

four licenses were withdrawn: one for failure to pay fees and three because the plants asked to

have them withdrawn, perhaps because they found it superfluous to pay.160 This is despite the

fact that 28 plants were inspected, none of them by surprise.161

The government took criminal action against eight illegal plants in 2004, but most had

little or no effect.162 The first conviction ever for piracy of DVDs was handed down in January

2004 against the chief technician of a plant that was caught with 37,000 CDs and DVDs.163 The

technician was given a one year suspended sentence, and the plant is still in operation today.164

In all the other raids the government seized items, but the plants remained in operation and the

owners and operators of the plants went unpunished.165 International organizations, such as the

IFPI, have also put forth efforts to reduce piracy in Russia by assisting in cases and raids.166 In

the last two years, the IFPI has assisted in 24 cases against the illegal CD plants, and in 21 of the

157 IIPA 2005 Special 301 Report on Russia, supra note 122, at 13. 158 Russia Risk: Legal & Regulatory Risk, ECONOMIST INTELLIGENCE UNIT-RISKWIRE, Jan. 24, 2005, at 10, available at 2005 WL 65236790 [hereinafter Russia Risk: Legal & Regulatory Risk]. 159 IIPA 2005 Special 301 Report on Russia, supra note 122, at 17. 160 See Id. 161 Id. 162 Id. 163 Id. 164 Id. 165 IIPA 2005 Special 301 Report on Russia, supra note 122, at 18. 166 Id. at 19.

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cases, there has been no resolution.167 In the other three cases, the CDs were destroyed but no

sentences were imposed, and almost all the plants are still in operation.168 With IFPI’s

assistance, 1,530 police raids were carried out in 2004 which resulted in the seizure of 2,086,000

CDs.169 As with the other raids, however, only a few of the cases made it to the courts, and even

then it was mainly in administrative proceedings.170 The operators received no deterrent criminal

penalties or imprisonment.171

All of these cases are evidence that the problem of enforcement dwarfs the legislative

problems Russia has with intellectual property protection. “The difficulty, however, is not that

these countries are unwilling to comply, but that their governments lack knowledge on the issues,

as they barely have a history of intellectual property rights and protection.”172 A number of

Russian officials have recently suggested that the high prices for legitimate goods are to blame

for the piracy problem.173 The IIPA says that this view evinces that Russia does not understand

the real problem.174 High prices have little or no bearing on the problem because most of the

goods are being sent to foreign markets.175 Instead, the opportunity for easy profits with little

threat of penalty is the primary cause of the piracy explosion in Russia.176

Considering Russia’s severe problem with this traditional type of piracy, its battle with

the new Internet market will be even harder to win. The continuing weakness in its legal system

167 Id. at 18. 168 Id. 169 Id. at 19. 170 Id. 171 IIPA 2005 Special 301 Report on Russia, supra note 122, at 19. 172 Collisson, supra note 108, at 1036. 173 IIPA 2005 Special 301 Report on Russia, supra note 122, at 22. 174 Id. 175 Id. 176 Id.

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means that companies and rights holders will have to take their own measures to combat

piracy.177

IV. RUSSIAN ONLINE MUSIC SALES

“Buying off the web opens a world of opportunity.”178 This is certainly true in the U.S.,

where Internet sights offering legal music sales are becoming increasingly popular.179 From

2001 until 2003, the amount of music purchased by “digital download” from the Internet

increased from 0.2 million to 1.3 million.180 Popular paid music websites such as MusicMatch,

iTunes, Napster, and Wal-Mart have recently attracted up to eleven million users.181 Because the

Internet is borderless, however, this new opportunity invites some international players that may

not conform to the legal standards of the U.S.182

Russian websites have been selling music via the Internet for many years. One such

website, Allofmp3.com, has been operating for over four years and is one of the oldest and most

popular Russian websites.183 This site, as well as others like MP3search.ru and 3MP3.ru, are

catching the attention of many Americans looking for cheap downloads.184 Allofmp3.com offers

a wide selection of music, including many artists such as the Beatles who have not yet authorized

177 Russia Risk: Legal & Regulatory Risk, supra note 158, at 10. 178 Charles Wright, Going For a Song On The Net, THE AGE, May 4, 2004, available at 2004 WL 76348134. 179 US Music Swappers Change Their Tune, THE REGISTER, Apr. 27, 2004, available at http://www.theregister.co.uk/2004/04/27/us_swappers_change_tune/ (last visited April 8, 2005). 180 2003 Consumer Profile, THE RECORDING INDUSTRY ASSOCIATION OF AMERICA (2003), available at http://www.riaa.com/news/marketingdata/purchasing.asp (last visited April 8, 2005) [hereinafter 2003 Consumer Profile]. 181 US Music Swappers Change Their Tune, supra note 179. 182 See Vauhini Vara, Russian Web Sites Offer Cheap Songs, But Piracy is Issue, WALL ST. J., Jan. 26, 2005, available at 2005 WL-WSJ 59838869. 183 See information about allofmp3.com from website, at http://www.allofmp3.com (last visited April 8, 2005). 184 Vara, supra note 182.

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their work for digital distribution.185 The biggest attraction for consumers to the website is the

price.186 Songs are sold on a per megabyte basis, which equates to roughly ten cents or less per

song.187 This is considerably cheaper than the 99-cent per-song rate that iTunes and other

American websites charge.188 In addition, the site contains an English-language version and

prices in U.S. dollars, which makes it extremely easy for foreign users to gain access.189 Vadim

Medvedev, an Allofmp3.com representative, claims that the site targets Russian-speaking users,

inside and outside of Russia.190 He claims the English version was developed only to make it

easier to access on computers outside of Russia.191

A. Russian Websites’ Legal Authority

Allofmp3.com’s success and popularity has sparked considerable controversy over

whether it is legal.192 The websites’ legal disclaimer says, “[u]sers are responsible for any usage

and distribution of all materials received from AllOFMP3.com. This responsibility depends on

the local legislation of each user’s country of residence. AllOFMP3.com’s Administration does

not keep up with the laws of different countries and is not responsible [for] the actions of non-

Russian users.” 193 The website claims that all the materials in MediaServices, its parent

company, are available for distribution through the Internet according to a private license

obtained from the Russian Multimedia and Internet Society (hereinafter ROMS).194 Under the

185 John Borland, MP3s for Pennies? Russian Cops Say No, CNET NEWS.COM, Feb. 22, 2005, at http://news.com.com/MP3s+for+pennies+Russian+cops+say+no/2100-1027_3-5586034.html (last visited April 8, 2005). 186 See Vara, supra note 182. 187 Charles Wright, Russian Site is Music to the Ears, THE AGE, Apr. 27, 2004, available at 2004 WL 76347313; Vara, supra note 182. 188 Vara, supra note 182. 189 Id. 190 Id. 191 Id. 192 See Borland, supra note 185. 193 Legal information from Allofmp3.com website, at http://help.allofmp3.com/help/help.shtml?prm=legal (last visited April 8, 2005). 194 Id.

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terms of the ROMS license, Allofmp3.com claims it pays for all the materials used according to

the Russian Copyright Act.195

ROMS is a national organization that claims it is “the national Russian organization

providing professional collective management of authors’ property rights and protection of

interests of rightsholders in cases of use of their works in digital interactive networks, including

the Internet.”196 ROMS operates by signing licensing agreements with users and businesses who

want to take advantage of copyrighted material.197 These licensing agreements give ROMS

authority to collect fees for using the copyrighted material and to distribute them as royalties to

authors, performers, record producers, other copyright holders it represents.198

ROMS’s authority to operate in this fashion comes from Title IV of the Russian Copyright

Act.199

Title IV, Articles 44-47 of the Copyright Act were developed to allow for the creation of

organizations that exercise collective economic rights of authors, performers, phonogram

producers, and other copyright holders when it is unpractical for them to exercise their rights

individually.200 Article 46 of the Copyright Act lays out the functions of these organizations,

which include such things as the granting of licenses, negotiating with users for appropriate

royalty amounts, collecting the royalties, allocating the royalties to the respective owners of the

copyrights, and performing any legal act essential to the defense of the rights.201 Article 45

195 Id. 196 Introductory Information about ROMS from website, available at http://www.roms.ru/?lang=eng (last visited April 8, 2005). 197 See generally Id. 198 See generally Id. 199 Background information about ROMS from website, available at http://www.roms.ru/?fms=2 (last visited April 8, 2005). 200 See Law of the Russian Federation No. 5351-1 of July 9, 1993 on Copyright and Neighbouring Rights, art. 44, translation available at LEXIS, garant 10001423, also available at http://www.fips.ru/avpen/docs.htm (last visited April 6, 2005) [hereinafter Russian Copyright Act]. 201 Russian Copyright Act, art. 46.

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paragraph 2 permits ROMS and the other collective rights organizations to obtain consent to

administer these rights by signing written contracts with the original rights holders, or by

obtaining contracts from the foreign organizations that administer equivalent rights.202

Furthermore, paragraph 3 of Article 45 says in part that [t]he licenses in question shall authorize the use, by the means that they specify, of all the works and subject matter of neighboring rights, and shall be granted in the name of all the owners of copyright or neighboring rights, including those who have not mandated the organization under paragraph 2 of this Article.203

This provision means a license can grant use of any copyrighted work, regardless of whether the

original copyright holder has given permission.204 In a press release, ROMS cites this as part of

their legal authority to grant licenses.205

Another loophole that allows for the use of copyrighted material on these websites

without the copyright holders’ permission is Article 39.206 This Article states, “communication

of the phonogram to the public by cable” shall be allowed “without consent from the producer of

a phonogram published for commercial purposes and from the performer whose performance is

recorded on the phonogram[.]”207 Phonogram is defined in the Copyright Act as “any exclusive

sound recording of performances or of other sounds[.]”208 In addition, “communication to the

public by cable” in the Copyright Act “means to communicate works, phonograms,

performances or programs of broadcasting or cable distribution organizations to the public by

cable, wire, optic fiber or comparable means[.]”209 The Internet could fall into the definition of

202 Russian Copyright Act, art. 45. 203 Russian Copyright Act, art. 45. 204 See Russian Copyright Act, art. 45. 205 Background information about ROMS from website, supra note 199. 206 Russian 5c MP3 Site “unlicensed”, THE REGISTER, May 5, 2004, available at http://www.theregister.co.uk/2004/05/05/russian_mp3_site/print.html (last visited April 9, 2005). 207 Law of the Russian Federation No. 5351-1 of July 9, 1993 on Copyright and Neighbouring Rights, art. 39, translation available at LEXIS, garant 10001423, also available at http://www.fips.ru/avpen/docs.htm (last visited April 6, 2005) 208 Russian Copyright Act, art. 4.25. 209 Russian Copyright Act, art. 4.24.

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wire, optic fiber, or comparable means.210 Payment of royalties to the phonogram producer and

performer is still required under this Act, and the royalties are to be collected by the collection

agencies created by Title IV of the Copyright Act.211

Entities such as ROMS, Allofmp3.com, and other Russian Internet music sites are using

these poorly worded Articles to illegally license and sell Western music without obtaining

permission from the copyright holders.212 These Articles are disharmonious with international

protection of phonograms on the Internet.213 For example, the United States has some of the

most comprehensive copyright protection legislation in the world. 214 In the United States,

despite the fact that Internet piracy is still rampant, music is allowed legally on the Internet in

two basic forms—webcasting and digital download.215 A short explanation of these two forms is

prudent to understand the Russian Internet problem.

B. Webcasting in the United States

Webcasting is the act of “transmitting music to an end-listener without making a

permanent copy of the song on the end-listener’s computer hard-drive.”216 Congress protected

these transmissions on the Internet through the Digital Performance Right in Sound Recordings

Act of 1995 (DPRA).217 The DPRA was the first modern attempt at regulating the digital

transmission of music.218 It gave owners of sound recordings the exclusive right of public

210 Russian 5c MP3 Site “unlincensed”, supra note 206. 211 Russian Copyright Act, art. 39. 212 IIPA 2005 Special 301 Report on Russia, supra note 122, at 27. 213 Id. 214 Eliza Shardlow Clark, Online Music Sharing in a Global Economy: The U.S. Effort to Command (Or Survive) the Tidal Wave, 14 MINN. J. GLOBAL TRADE 141, 147 (2004). 215 See Robert J. Delchin, Musical Copyright Law: Past, Present and Future of Online Music Distribution, 22 CARDOZO ARTS & ENT. L.J. 343, 350 (2004). 216 Richard D. Rose, Connecting the Dots: Navigating the Laws and Licensing Requirements of the Internet Music Revolution, 42 IDEA 313, 344 (2002). 217 Delchin, supra note 215, at 352. 218 Id. at 354.

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performance through digital audio transmissions.219 The DPRA distinguishes between

interactive and non-interactive services.220 An interactive service is “one that enables a member

of the public to receive, on request, a transmission of a particular sound recording chosen by or

on behalf of the recipient.”221 Under the DPRA, these interactive services—often called pay-per-

listen or audio on-demand—must be voluntarily licensed.222

Non-interactive transmissions are defined as services in which a listener cannot request

certain songs at any given time.223 They are divided into two different types, subscription and

non-subscription services.224 The first type is subscription services, which are “controlled and

limited to particular recipients, and for which consideration is required to be paid.”225 These

services require licensing from the copyright owners before the music is transmitted.226 If the

subscription to the service is voluntary, the copyright owners are free to refuse licenses if they

choose; but if the subscription service is compulsory, record companies are required to grant

compulsory licenses by using rates determined by the Copyright Office227 or individually

219 17 U.S.C. § 106(6) (enacted under the Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, § 2(3), 109 Stat. 336, 336 (1995)). 220 Delchin, supra note 215, at 352. 221 Id.; Digital Performance Right in Sound Recordings Act of 1995, Pub. L. No. 104-39, 109 Stat. 336 (1995) (Codified as various amendments to 17 U.S.C.) 222 Delchin, supra note 215, at 352. Most of the time, permission to use a song obtained through a voluntary licensing agreement is a private, contractual matter between the parties. Dorothy Schrader, Copyright Term Extenstion and Music Licensing: Review of Recent Developments, in COPYRIGHT: CURRENT ISSUES AND LAWS 100 (John v. Martin ed., Nova Science Publishers, Inc.) (2002). However, “when the law creates a compulsory or statutory license, no negotiation is necessary.” Id. The user of the song simply complies with the statutory conditions for its use and pays the royalty laid out by the statute. Id. 223 Delchin, supra note 215, at 353. 224 Id. 225 Id.; DPRA, 109 Stat. 336 (1995). 226 Delchin, supra note 215, at 353. 227 The United States Copyright Office was created in 1897 as a separate department of the Library of Congress. Background Information from U.S. Copyright Office website, at http://www.copyright.gov/circs/circ1a.html (last visited April 9, 2005). Its mission is to promote creativity by administering a national copyright system. Id. It provides expert assistance to Congress on Intellectual Property matters; it assists in drafting copyright legislation, conducts studies, and gives advice regarding compliance with multilateral agreements. Id. In addition, it is in charge of administering compulsory and statutory licenses. Id. These licenses are issued for the public performance of, among other things, digital audio transmissions. Id. The office sets the rates of royalty payments for use of the compulsory licenses. Id. In addition, it collects and administers the royalty fees collected from the licenses. Id.

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negotiated.228 These compulsory licenses allow a webcaster to “play unlimited recordings

without receiving a license for each one.”229

The second type of non-interactive service is a non-subscription non-interactive

service.230 This type involves what are commonly referred to as pure “‘internet radio station[s]’”

that entail absolutely no user interaction, as well as traditional broadcast radio stations that

simulcast their programs over the internet.231 These webcasts were not seen to represent as large

a threat to the recording industry as did interactive and subscription services because the user had

no control over what he or she was hearing or might hear next; therefore the disincentive to

purchase the record was not present.232 As a result, these non-interactive non-subscription

services were exempted from licensing.233

In 1998, the United States granted even more authority to copyright holders with the

passage of the Digital Millennium Copyright Act (DMCA).234 According to the DMCA, non-

interactive non-subscription Internet webcasters were no longer exempt from licensing and

paying royalties.235 Now, in order to be eligible for a license, even non-subscription non-

interactive webcasters must adhere to numerous requirements.236

C. Digital Download 228 Delchin, supra note 215, at 353. 229 Emily D. Harwood, Staying Afloat in the Internet Stream: How to Keep Web Radio from Drowning in Digital Copyright Royalties, 56 FED. COMM. L.J. 673, 680 (2004). 230 Delchin, supra note 215, at 353. 231 Id. 232 See Generally Harwood, supra note 229, at 680. 233 Delchin, supra note 215, at 353. 234 Harwood, supra note 229, at 680. 235 Harwood, supra note 229, at 681; 17 U.S.C. § 114(d)(1)(A) (2000); Digital Millennium Copyright Act, Pub. L. No. 105-304, § 405 (codified in various sections of 17 U.S.C.). 236 Harwood, supra note 229, at 681. Webcasters are required to ensure that (1) a listener may only have limited input on the songs selected, such as choosing a particular genre or style of music. Id.; (2) The station cannot intentionally switch from one channel to another. 17 U.S.C. § 114(d)(2)(A)(ii); (3) No more than two songs from one album can be played in a three-hour period, and no more than two from the same album consecutively. 17 U.S.C. §114(d)(2)(C)(i), (j)(13)(A); (4) Titles of the songs cannot be announced in advance. 17 U.S.C. §114(d)(2)(C)(ii); (5) While the song is playing, the webcaster must include the title, artist, and CD pertaining to the song. 17 U.S.C. §114(d)(2)(C)(ix).

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The second way a song is used legally over the Internet is through digital download.237

United States Copyright law confers to owners of copyright material the exclusive right to

“reproduce their copyrighted works in copies or phonorecords.”238 It also gives copyright

owners the exclusive right to “distribute copies or phonorecords of the copyrighted work to the

public by sale or other transfer of ownership, or by rental, lease, or lending[.]”239 Therefore, in

order to sell fixed sound recordings you must be the copyright owner—such as the recording

artist or record studio—or you must have permission from the copyright owner.240 This is called

a master recording license and it is not compulsory.241 In order to ensure that copyright owners

were compensated for the reproduction and distribution of their material, Congress created the

compulsory mechanical license found in 17 U.S.C. § 115.242 A person may obtain a compulsory

license to make and distribute a work only if the primary purpose is to distribute it publicly for

private use and the work has already been publicly distributed in the United States.243 In

addition, one may not obtain a compulsory license for duplicating a sound recording unless “(i)

such sound recording was fixed lawfully; and (ii) the making of the phonorecords was authorized

by the owner of the copyright in the sound recording[.]”244

In 1995, Congress passed the DPRA, which amended § 115 to include “‘digital

phonorecord deliveries’” (DPDS).245 A DPDS is defined as

237 This type includes selling transmissions that include “the delivery of computer files that contain sounds playable on computers, portable players and wireless devices.” Cydney A. Tune, Licensing Music on the Internet, 22-SUM ENT. & SPORTS LAW. 1, 18 (2004). Digital distribution by download involves the “downloading of a complete audio content file from the Internet onto a computer hard drive . . . .” Id. Once the music file is downloaded, it is stored on the computer’s hard drive and can be listened to at any time. Id. 238 17 U.S.C. §106(1). 239 17 U.S.C. §106(3). 240 See Dorothy Schrader, Copyright Term Extenstion and Music Licensing: Review of Recent Developments, in COPYRIGHT: CURRENT ISSUES AND LAWS 103 (John v. Martin ed., Nova Science Publishers, Inc.) (2002) 241 Rose, supra note 216, at 341-42. 242 Schrader, supra note 240, at 102. 243 17 U.S.C. § 115(a)(1). 244 17 U.S.C. § 115(a)(1). 245 Schrader, supra note 240, at 103.

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each individual delivery of a phonorecord by digital transmission of a sound recording which results in a specifically identifiable reproduction by or for any transmission recipient of a phonorecord of that sound recording, regardless of whether the digital transmission is also a public performance of the sound recording . . . .246

As a result, copyright owners’ exclusive right to reproduce their copyrighted works in copies or

phonograms now applies to downloading music from the Internet.247

D. Russia compared to the United States

A comparison of the laws of Russia and the United States plainly illustrate the

deficiencies Russia has in protecting works over the Internet. Where the United States has

clearly established that the downloading of music and the broadcasting of music over the Internet

are two entirely different things, Russian law has not. In addition, where the United States has

defined a reproduction of a phonogram or a copy of a work to include a digital file, Russia has

not. According to the Russian Copyright Act, a “copy of a work” is defined as an example of the

work, regardless of the material in which it is made.248 A “copy of a phonogram” is defined as

the duplicate of the phonogram, on any material medium.249 Finally, a “reproduction of a

phonogram” is defined as the making of a copy of phonogram on any physical medium.250 All

of these definitions only recognize phonogram duplication in a material form.

Because of these deficiencies, ROMS and Allofmp3.com are licensing and distributing

music files without permission from the copyright owner. Under United States law, these

distributions would clearly not be labeled as broadcasts or performances because users download

a permanent copy of the work on their hard drive. Instead, they would be labeled as a

reproduction and would require permission from the copyright owner. 246 17 U.S.C. § 115(d). 247 See Rose, supra note 216, at 359. 248 Law of the Russian Federation No. 5351-1 of July 9, 1993 on Copyright and Neighbouring Rights, art. 4.26, translation available at LEXIS, garant 10001423, also available at http://www.fips.ru/avpen/docs.htm (last visited April 6, 2005). 249 Russian Copyright Act, art. 4.27. 250 Russian Copyright Act, art. 4.5.

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E. Others’ Reaction to Internet Piracy in Russia

Many organizations have expressed their concern over this illegal Internet distribution of

music. The IIPA, in its 2005 Report on the Russian Federation, named the immediate takedown

of websites such as Allofmp3.com as one of the seven critical steps that Russia must take in the

next few months to begin effectively confronting piracy.251 The IFPI has also complained about

their activities.252 They claim that foreign rights holders do not surrender the rights to their work

in Russia because of Article 47 paragraph 2 of the Copyright Act. 253 Article 47 paragraph 2

gives copyright owners who have not given collection agencies permission to use their works the

right to demand that the agencies pay them royalties or exclude their work from user licenses.254

However, Russia’s IFPI legal advisor has expressed doubt over the success of any legal action,

as he stated in an interview that “[b]ecause of these loopholes we don’t have much chance of

succeeding if we attack these companies who are using music files on the Internet under current

Russian laws.”255

The Russian government has taken some small steps to address the Internet problems

through legislation. As mentioned earlier, in July 2004, the Russian government passed some

long awaited amendments to the Copyright Act.256 Some of these amendments were introduced

in an effort to implement the WIPO Internet treaties.257 Specifically, Russian Copyright Act

Article 16 Economic Rights, Article 37 the Rights of the Performer, Article 38 Rights of the 251 IIPA 2005 Special 301 Report on Russia, supra note 122, at 14. 252 See Copyright Enforcement Comes to Russia, ONLINE REP. (U.K.), Feb. 26, 2005, available at 2005 WLNR 3162648. 253 Ben Hammersley, Online: Can’t Stop the Music: Can’t Stop the Music Continued from Back Page: Arcane Licensing Deals haven’t Prevented the Growth of Many New Sites Offering a Wide Selection of Quality Music Downloads, THE GUARDIAN, Mar. 18, 2004, available at 2004 WL 56439389. 254 Russian Copyright Act, art. 47 paragraph 2. 255 Russian 5c MP3 Site “unlicensed”, supra note 206. 256 See Federal Law No. 72-FZ of July 20, 2004 on Amending the Law of the Russian Federation on Copyright and Neighbouring Rights, translation available at LEXIS, garant 12036318, also available at http://www.copyright.ru/english-1557.html (last visited April 9, 2005) [hereinafter Russian Copyright Act with 2004 Amendments].. 257 IIPA 2005 Special 301 Report on Russia, supra note 122, at 27.

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Phonogram Producer, and Article 39 Use of a Published Phonogram for Commercial Purposes

Without Consent from the Phonogram Producer and the Performer, were all amended.258 The

amendments for Articles 16, 37, and 38 all grant the copyright owner the right to communicate

the work in a way that enables any person to have access to it in an interactive regime,

irrespective of place and time.259 This is referred to as the right of “making available to the

public.”260 In addition, Article 39, which originally granted exceptions to the requirement of

consent for the public performance or broadcast of phonograms, was amended to state that the

exceptions do not apply to the right of making the phonogram available to the public.261

The amendments pertaining to the exclusive “right of making available and right of

communication to the public” are adopted from Article 8 of the WCT and Article 14 of the

WPPT.262 This means authors and producers of phonograms shall have the exclusive right to

authorize their works to be placed on the Internet in such a way anyone can access the works at

any place or time.263 The amendments strengthen authors and performers control over their

works and recognize their rights in a digital world.264 In addition, they close the loophole in

Article 39 allowing communication of phonograms to the public without consent, thereby giving

rights holders an important enforcement tool against digital piracy.265 Unfortunately, these

particular amendments were delayed and do not go into effect until September of 2006, which

means it is likely that the same problems and legal obstacles will persist until they become

effective.266

258 See Russian Copyright Act with 2004 Amendments. 259 Russian Copyright Act with 2004 Amendments. 260 Russian Copyright Act with 2004 Amendments. 261 Russian Copyright Act with 2004 Amendments. 262 See Russian Copyright Act with 2004 Amendments; WCT, supra note 60; WPPT, supra note 67. 263 Summary of the WCT, supra note 62. 264 See IIPA 2005 Special 301 Report on Russia, supra note 122, at 27. 265 See Id. 266 See Id.

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F. Hopeful Developments

Although the Internet piracy problem remains the same, some hopeful developments on

the part of Russia illustrate they are attempting to move in line with international standards of

digital copyright protection. Until January 2004, the collection agency ROMS had transferred all

the royalties they collected through their licenses to the Russian Authors Organization (RAO)

per their agreement.267 RAO is a noncommercial public organization created by Russian authors

in 1993 to protect copyrights for the entire Russian Federation.268 Its primary goals are to

control the property rights of authors in the individual transfer of rights to the use of science,

literature and skill, and to represent the legitimate interests of authors in the state and public

organs, and abroad.269

In addition, ROMS was also a member of the International Confederation of Societies of

Authors and Composers (CISAC). CISAC is a non-governmental, non-profit international

organization founded in 1926 that works towards increased recognition and protection of

creators’ rights.270 As of 2004, CISAC possessed a membership of 207 authors’ societies in 109

countries, and indirectly represented more than two million creators.271 In 2003, its members

collected more than 6.2 billion Euros in royalties.272 Its activities are aimed at improving the

position of authors and composers as well as enhancing the quality of collective administration273

267 ROMS Press Release, available at http://www.museekster.com/files/press-release%20ROMS.doc (last visited April 9, 2005). 268 RAO Introductory Information from website, translation available at http://babelfish.altavista.com/babelfish/trurl_pagecontent?lp=ru_en&trurl=http%3a%2f%2frao.ru%2forao%2f (last visited April 9, 2005). 269Id. 270 Background information from CISAC website, at http://www.cisac.org/web/Content.nsf/Builder?ReadForm&Page=Article&Lang=EN&Alias=A-US-CISAC (last visited April 9, 2005). 271 Id. 272 Id. 273 “Collective administration is the exercise of author’s right by organisations which represent creators and look after the enforcement of their rights.” Information about Collective Administration from CISAC website, at http://www.cisac.org/web/content.nsf/Builder?ReadForm&Page=Article&Lang=EN&Alias=MAN-AR-07 (last

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of their rights around the world.274 Regarding musical works, RAO manages the rights of public

performance and broadcasting by negotiating with users—such as television stations, cinemas,

and bars—for payment and conditions for the use its copyrighted works.275

In 2004, both CISAC and RAO expelled ROMS from their membership.276 Because of

their exclusion from RAO, ROMS is no longer licensed to issue their own licenses for use of

copyright works on the Internet in Russia.277 RAO claims it ended its agreement with ROMS

because of extremely ineffective activity.278 In the last two years, ROMS has only collected a

total of $3,000 in royalty amounts.279 In addition, RAO claims that per the 2004 amendments to

the Copyright Act, namely the right of making available to the public, individual agreements

with each author or an appropriate right holder must be obtained to allow use of works on the

Internet.280 ROMS, claims RAO, has not obtained permission from western foreign authors and

is therefore engaging in piracy “in the pure form.”281 CISAC also expelled ROMS from its

organizations in 2004 on the grounds that “it has been issuing licenses to copyright users without visited April 9, 2005). Because of the difficulty of individual creators to monitor who is using their work and for users of works to contract with the proper right holder every time they want to use a work, collective administration societies were formed. Id. By managing the rights of creators, these organizations provide a valuable economic and cultural contribution to society. Id. They operate by granting licenses to use authors’ works for the payment of royalties. Id. 274 Background Information from CISAC Website, supra note 270. 275 Information about Musical Works from CISAC website, at http://www.cisac.org/web/content.nsf/Builder?ReadForm&Page=Article&Lang=EN&Alias=man-ar-08-pop-01 (last visited April 9, 2005). 276 See Sergey Parthenon, ROMS—“This is Piracy in Pure Form”, WEBINFORM, Oct. 24, 2004, translation available at http://babelfish.altavista.com/babelfish/trurl_pagecontent?lp=ru_en&trurl=http%3a%2f%2fwebinform.ru%2finterview%2f1857.html (last visited April 9, 2005); ROMS No Longer a CISAC Member, Statement from CISAC, available at http://www.cisac.org/web/content.nsf/Builder?ReadForm&Page=Article&Lang=EN&Alias=Web-2005-03-ROMS (last visited April 9, 2005). 277 See Sergey Parthenon, ROMS—“This is Piracy in Pure Form”, WEBINFORM, Oct. 24, 2004, translation available at http://babelfish.altavista.com/babelfish/trurl_pagecontent?lp=ru_en&trurl=http%3a%2f%2fwebinform.ru%2finterview%2f1857.html (last visited April 9, 2005). 278 See Id. 279 See Id. 280 See Id.; See Federal Law No. 72-FZ of July 20, 2004 on Amending the Law of the Russian Federation on Copyright and Neighbouring Rights, translation available at LEXIS, garant 12036318, also available at http://www.copyright.ru/english-1557.html (last visited April 9, 2005). 281 Parthenon, supra note 277.

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the authority to do so from all relevant copyright owners.”282 It stated that this contravened

internationally accepted collective administration principles and injured the artists represented by

CISAC.283

In response, ROMS claimed that the figure of royalties that RAO claims they paid was

clearly understated.284 ROMS also claims that the 2004 amendments to the Copyright Act did

not change their legal basis for operating because under Title IV, which was not amended, they

still have the right and obligation as a collection agency to issue user licenses on behalf of all

rights holders and to gather royalties for their use.285 In view of the fact that ROMS is no longer

a member of RAO or CISAC, they have no authority to award licenses on their behalf.286

Therefore, Allofmp3.com and any other website claiming to be licensed by ROMS no longer has

the required legal authority.287

In light of Allofmp3.com’s actions, the Moscow City police opened an investigation into

the website.288 Allofmp3.com and its principles are alleged to be involved in large-scale

copyright infringement by selling music without permission from Russian rights holders or

international rights holders.289 On February 8, 2004, the Moscow City police submitted the

results of its investigation to the Moscow City Prosecutors Office.290 On the same day, the IFPI,

on behalf of its members, also submitted a formal complaint to the Moscow City Prosecutors

282 ROMS No Longer a CISAC Member, Statement from CISAC, available at http://www.cisac.org/web/content.nsf/Builder?ReadForm&Page=Article&Lang=EN&Alias=Web-2005-03-ROMS (last visited April 9, 2005). 283 Id. 284 Sergey Parthenon, ROMS: The Retaliatory Attack, WEBINFORM, Nov. 11, 2004, translation available at http://babelfish.altavista.com/babelfish/trurl_pagecontent?lp=ru_en&trurl=http%3a%2f%2fwebinform.ru%2finterview%2f1912.html (last visited April 9, 2005). 285 Id. 286 See ROMS No Longer a CISAC Member, supra note 282. 287 See Id. 288 Copyright Enforcement Comes to Russia, supra note 252. 289 Id. 290 Id.

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Office in support of further legal action.291 In response to Moscow’s decision to investigate

Allofmp3.com, the IFPI announced We have consistently said that Allofmp3.com is not licensed to distribute our members’ repertoire in Russia or anywhere else. We are pleased that the police are bringing this important case to the attention of the prosecutor. We very much hope and expect that the prosecutor will proceed with this case, which involves the sale and digital distribution of copyrighted music without the consent or authorisation of the rights holders.292

Unfortunately, shortly after receiving the investigation results, the Moscow District

Attorney refused to file charges against the website.293 Refusal was based on the proposition that

Russian copyright law does not cover digital media.294 From the prosecutor’s point of view,

distribution of works via the Internet is impossible because current copyright law only dictates

physical transfers of works.295 Furthermore, the downloading of these works does not result in

the creation of a new copy of the work; it only creates conditions for use by the end consumer.296

This decision represents not only the deficiencies in Russian Copyright Law, but also the overall

lack of understanding about the status of appropriate intellectual property protection for the

Internet, and the misguided and outdated views of intellectual property in general.

V. SOLUTIONS TO RUSSIA’S PIRACY PROBLEM

It is evident that Russia is not taking adequate steps to enforce copyright protection. In

order to protect copyrights, the United States and its copyright owners need to pursue a two-

pronged approach. First, U.S. copyright owners need to pursue lawsuits against online copyright 291 Id. 292 Id. 293 Russian DA Clears Allofmp3.com of Copyright Infringement Charges, ONLINE REP. (U.S.) 7, Mar. 12, 2005, available at 2005 WLNR 4377353. 294 Id. 295 The Prosecutor of the Moscow’s South-Western District Rejected to Initiate a Criminal Case Against Distribution of Music Recordings by AllofMP3.com Internet Resource, PRIME-TASS.RU, Mar. 4, 2004, translation available at http://www.museekster.com/allofmp3faq.htm#Will%20the%20RIAA%20or%20the%20IFPI%20have%20Allofnp3%20closed%20down%20in%20the%20near%20future? (last visited April 9, 2005). 296 Id.

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infringers to fix the Internet piracy problem in Russia before it gets worse. Second, the United

States must take drastic steps to pressure the Russian government to solve the piracy problem

itself by imposing trade sanctions.

A. Lawsuit Against Websites

Because of the Russian government’s refusal to prosecute Allofmp3.com, copyright

holders in the United States should file civil suits in Russia against this website and other

Russian websites who are distributing their music without obtaining permission.297 Regardless

of their success, it will alert the Russian courts to the problem and provide a model to the court

for how copyrights for musical works should be applied in the digital world.298 In addition, it

will make Russia aware of the fact that copyright owners are serious about enforcing their rights

over the Internet.299 Copyright holders could also sue the websites in the United States.300

Copyright owners have had some recent success in U.S. courts against websites similar to

Allofmp3.com.301

On October 25, 2004, the RIAA agreed to a ten million dollar out-of-court settlement in a

suit it brought last year in United States District Court for the District of Columbia against a

Spanish online service called puretunes.com.302 Puretunes.com, run by Spanish-based Sakfield

Holding Co., was accused by the RIAA of violating copyrights and misleading the public by

“claiming to be an authorized music distributor even though it hadn’t obtained licenses from the

297 See generally David E. Miller, Combating Copyright Infringement in Russia: A Comprehensive Approach for Western Plaintiffs, 33 VAND. J. TRANSACT’L L. 1203 (2000). 298 See generally Id. 299 See generally Id. 300 See generally John Borland, MP3 Site Settles for $10 Million with RIAA, CNET NEWS.COM, Oct. 25, 2004, available at http://news.com.com/2102-1027_3-5425885.html?tag=st.util.print (last visited April 9, 2005). 301 See Id. 302 Puretunes.com Settles Record Companies’ Copyright Infringement Lawsuit, Press Release from RIAA, Oct. 25, 2004, available at http://www.riaa.com/news/newsletter/102504.asp (last visit April 10, 2005).

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labels.”303 In its opinion, the District Court stated that personal jurisdiction was established

because residents of the District of Columbia had accessed the website and downloaded music

files from it.304 The opinion is also important because it applied personal jurisdiction to an

online provider of unauthorized electronic copies of copyrighted music files.305 Depending on

copyright owners’ ability to prove that Allofmp3.com sold music to U.S. residents, they might be

able to receive a favorable ruling in light of this.

B. Special 301 Sanctions

As a result of Russia’s failure to control and reduce its piracy problem on its own, the

United States should use section 301 sanctions to compel compliance. Section 301 grew out of

the 1974 Trade Act and it is the principal statutory mechanism by which the United States

“protects its exports of goods and services from unfair trade practices.306 The law empowers the

United States Trade Representative (USTR) to oversee international piracy and sanction or

discipline those countries that fail to develop and enforce copyright laws in accordance with

established agreements.307 Section 301 operates by requiring the USTR to make a yearly

determination of countries that are denying adequate and effective protection of intellectual

property rights and placing those countries on a watch list, priority watch list, or identifying a

country as a Priority Foreign Country.308 The USTR uses the watch list and priority watch list to

303 Jon Healey, Record Labels Sue Owner of Puretunes Website, DETNEWS.COM, July 10, 2003, available at http://www.detnews.com/2003/technology/0307/13/technology-213852.htm (last visited April 10, 2005). 304 See generally Arista Records, Inc. v. Sakfield Holding Company, 314 F. Supp. 2d 27 (2004). 305 See generally Id. 306 Seth Robbins, The U.S. Government’s Fight Against Napster and Online Music Piracy: The Inevitable Conflict, 25 SUFFOLK TRANSNAT’L L. REV. 217, 226 (2001). 307 Id. at 227. 308 Kim Newby, The Effectiveness of Special 301 In Creating Long Term Copyright Protection for U.S. Companies Overseas, 21 SYRACUSE J. INT’L L. & COM. 29, 35-36 (1995).

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alert countries that their practices are being monitored by the USTR.309 A Priority Foreign

Country, the highest level of classification, is a country: that has the most ‘onerous or egregious’ practices that deny protection or equitable market access; (2) whose practices have the ‘greatest adverse impact,’ either actual or potential, on the relevant U.S. products; or (3) that is not engaging in good faith negotiations to provide effective protection of intellectual property rights.310

Once a country is identified as a Priority Foreign Country, the USTR must initiate an

investigation against the country within thirty days.311 Once an investigation has been initiated,

the USTR is required to request consultations with the country to discuss its practices and

possible resolutions to the problem.312 Based on the negotiations and investigation, the USTR

must make a determination about whether violations do exist, and whether substantial progress

has been made by the offending country.313 If there are substantial violations, then the USTR is

generally required to take action within thirty days of the determination.314 The three main tools

that the USTR may use to force compliance or reform are “the suspension of trade benefits, the

imposition of duties or other import restrictions, and the entering into of binding agreements

committing the country either to stop the offending practices or provide the U.S. with

compensatory trade benefits.”315

Russia has been on the priority watch list since 1997.316 In 2005, the IIPA recommended

that Russia be upgraded from the priority watch list to a Priority Foreign Country.317 It also

recommended that Russia’s eligibility for the duty-free trade benefits under the Generalized

309 Id. at 36. 310 Id. at 35. 311 Id. at 36. 312 Id. at 37. 313 Id. 314 Newby, supra note 308, at 37-38. 315 Id. at 38. 316 Connie Neigel, Piracy in Russia and China: A Different U.S. Reaction, 63—FALL LAW & CONTEMP. PROBS. 179, 188 (2000). 317 IIPA 2005 Special 301 Report on Russia, supra note 122, at 13.

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System of Preferences Program318 (GSP) should be suspended.319 Despite the fact that Russia

has one of the highest piracy rates in the world, they still received 429.8 million dollars worth of

trade benefits under the GSP program in 2003.320 Even though Russia has made amiable

attempts over the years to pass adequate legislation, its attempt to enforce those laws against

piracy have repeatedly failed.321 As a result, Russia’s piracy problem has become worse each

year.322 The popularity of illegal online distribution of music in Russia and the government’s

failure thus far to stop it is evidence that the piracy problem could become exponentially worse

in the near future unless something is done.323 The United States should immediately suspend

Russia’s GSP benefits until the country recognizes the online piracy problem and until it

enforces copyright protection to the extent that a noticeable reduction in piracy results.

Even though the United States has never threatened Russia with this type of trade

sanctions, it has achieved some success in the past by doing so to other nations.324 The United

States has pursued much more aggressive actions against China in the past to pressure them into

protecting intellectual property.325 On three separate occasions, it has threatened trade

sanctions.326 In 1992, the United States classified China as a Priority Foreign Country and

threatened sanctions unless it provided more protection for U.S. intellectual property works.327

The threats resulted in a comprehensive agreement that required China to join the Berne

318 The U.S. Generalized System of Preferences (GSP) is a government program designed to promote economic growth in the developing world. Information about Generalized System of Preferences from USTR website, available at http://www.ustr.gov/Trade_Development/Preference_Programs/GSP/Section_Index.html (last visited April 10, 2005). This program provides preferential duty-free entry for more than 4,650 products from 144 different countries. Id. 319 IIPA 2005 Special 301 Report on Russia, supra note 122, at 25. 320 Id. 321 See generally IIPA 2005 Special 301 Report on Russia, supra note 122. 322 See generally Id. 323 See generally Id. 324 Neigel, supra note 316, at 189-90. 325 Id. at 196. 326 Id. 327 Id. at 193.

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Convention and the Phonograms Convention.328 Again, in 1994, the United States became

frustrated with China’s lack of intellectual property enforcement and threatened them with trade

sanctions worth 1.08 billion dollars in Chinese products.329 After China threatened sanctions of

their own, the two countries finally came to an agreement in 1995 that provided for enhanced

enforcement measures.330 For the third time, in 1996, the United States classified China as a

Priority Foreign Country and threatened trade sanctions.331 Again, the countries averted a trade

war when China threatened its own sanctions because the United States withdrew its threats and

the two countries reached yet another agreement almost identical to the 1995 agreement.332

China has made significant progress in combating piracy since the signing of the 1996

agreement, but the United States has vowed to impose trade sanctions again if they reduce their

efforts.333

Another country in which the United States has had some success with special 301

sanctions is Thailand.334 In 1991 and 1992, the United States listed Thailand as a Priority

Foreign Country because of its persistent copyright violations and the losses to United States

industry that was occurring.335 In response, the Thai government amended their laws to bring

them to the international level and increased enforcement by conducting more government raids

and seizing more copying equipment.336 In order to display its efforts to the United States, the

Thai government even publicly burned the seized pirated music and videos.337 Under pressure

from U.S. industry, the United States again named Thailand as a Priority Foreign Country in 328 Id. 329 Id. at 194. 330 Neigel, supra note 316, at 194. 331 Id. at 195. 332 Id. at 196. 333 Id. 334 See Newby, supra note 308, at 45. 335 Id. 336 Id. 337 Id.

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1993.338 Thailand quickly entered into negotiations to avoid sanctions.339 As a result, Thailand

passed amendments in 1994 that extended copyright protection to audio-visual works, books, and

audio cassettes, as well as defined software as an artistic work and strengthened the penalties on

infringers.340

There is no question that special 301 actions by the United States grab a country’s

attention.341 The possible threat of sanctions at least compels countries to acknowledge and

work with the United States.342 In the past, countries like China and Thailand might not have

reformed without pressure from special 301 sanctions.343 One theory for enforcing stringent

intellectual property protection upon other nations is that it benefits both the U.S. and the

infringing nation.344 A country that has strong protection for intellectual property will be able to

stimulate research, development, and production.345 These things will in turn lead to a more

highly skilled labor force and encourage other nations to invest and develop technology in that

country.346 However, the mere fact that 301 sanctions are necessary questions the theory that

strict intellectual property standards would benefit the infringing nation.347 Otherwise, more

countries would be working unilaterally to protect against intellectual property violations.348

One explanation for the lack of protection is that freedom of access to goods is a value that many

foreigners—including Russians—covet.349 As a result, little thought is given to whether

338 Id. at 46. 339 Id. 340 Newby, supra note 308, at 46. 341 Id. at 47. 342 Id. 343 Id. 344 Robbins, supra note 306, at 244. 345 Id. 346 Id. 347 Clark, supra note 214, at 173. 348 Id. 349 Id. at 174.

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someone living in the United States is not financially benefiting from the use of the work.350 It is

hard to tell whether imposing sanctions on Russia will produce a reduction in piracy, but the past

failures of Russia to makes changes by itself call for action. Therefore, in order for the sanctions

or the threat of sanctions to be effective, the cost must outweigh the economic benefit to Russia

to continue in its ways.351

VI. CONCLUSION

Russia is one of the largest infringers of copyrighted music in the world. Its pirated

works represent huge monetary losses to the United States every year. In addition to its large

market for physical piracy, Russia is now developing a rapidly growing market for Internet

music piracy. Because the Internet is borderless, this represents a direct threat to the United

States. These websites, such as Allofmp3.com, are illegally selling large amounts of American

music without permission from the appropriate rights holders. To this point, they have been able

to operate because of a couple of reasons. First, outdated Russian laws fail to clearly define and

apply copyright to the digital world. Second, the Russian government lacks the knowledge and

motivation to enforce intellectual property rights in general, especially as they apply to the

Internet. In order to remedy Russian Internet piracy and the country’s piracy problem in general,

a two-pronged approach must be taken. First, U.S. rights holders must sue the websites in U.S.

courts and Russian courts. Second, the United States must issue sanctions on Russia until the

country takes action to update its laws to conform to international standards and starts to enforce

those laws to make a noticeable reduction in its piracy rates.

350 Id. 351 See Robbins, supra note 306, at 244.